A Reader's Question on Financing is Answered

by John Price on 07/07/10

I'm glad that some are reading my articles, even though no one is following me. I got an email question on my financing article. The specific question was whether a definite building time line was required for a bank to make a favorable land loan.

The specifics were that the person was interested in land for a custom home in the somewhat distant future. But they want to pick out the land now. Can they still get such favorable financing from local banks?

My answer is, yes they can.

I am not intimately familiar with bank regulations and regulations do play a part here. The loan application has a section on the purpose of the loan. For a bank to give you the lowest down payment, that purpose must be for your future home. If it is for investment or speculation, regulations and/or bank policies typically require more down.

The banks I deal with are not concerned with a time table. They are concerned with ultimate intent. If you want to buy land now and plan on building in a year, it is for your personal home and use. If you want to buy land now for your retirement home 10 or more years out, it is still for your personal home and use. You can honestly answer the question that you are buying for your home. And based on that simple honest intent, you can get better terms.

The good local banks know plans and circumstances may change, and you might totally change your plans in a few years; but your intent at the time of applying for the loan is what counts.

The original article was posted May 29, 2010 and was titled, "Financing is Readily Available for Home Sites for Custom Homes". It was copied to this site today.

Some or all of the people or entities who are principals in the LLCs that own the properties on this web site are licensed Real Estate Brokers and are agents. John Price is either an owner or a manager of an LLC that is an owner of all of the properties on this web site.